Breaking out of the Poverty Trap

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Breaking out of the Poverty Trap CHAPTER THREE Breaking Out of the Poverty Trap Lindsay Coates and Scott MacMillan Introduction In 2018, one of us visited a rural village in Bangladesh to speak to participants in a “graduation program,” a term used to describe programs designed to break the poverty trap with a boost of multiple, sequenced interventions. When we asked one woman what the program had changed for her, she brought out a piece of paper inviting her to a village event. Before she went through the program, her neighbors barely knew she existed, she said. Now she was a member of the com- munity, invited to people’s homes and weddings. One hears echoes of this senti- ment from participants in similar graduation programs worldwide. Such stories illustrate just one of the many cruel aspects of ultra- poverty: those afflicted by it tend to be invisible— to neighbors, distant policymakers, and nearly everyone in between. The ultra- poor need to stop being invisible to policymakers. We need to pay closer attention to the poorest and the unique set of challenges they face, for without a better understanding of the lived reality of ultra- poverty, we will fail to live up to the promise of “leaving no one behind.” Without programs tai- lored for people in these circumstances, the extreme poverty rate will become increasingly hard to budge. We are already starting to see this reflected in global poverty data. For decades, the global extreme poverty rate, defined as the portion of humanity living below the equivalent of $1.90 per day, fell rapidly, from 36 percent in 1990 to 10 percent in 2015. Earlier in this decade, optimism took hold With special thanks to Emily Coppel and Isabel Whisson. 41 Kharas-McArthur-Ohno_Leave No One Behind_i-xii_1-340.indd 41 9/6/19 1:57 PM 42 Lindsay Coates and Scott MacMillan that we may even remove extreme poverty from the face of the earth.1 The World Bank has interpreted “eradication” as less than 3 percent, but optimism is now waning that we will reach even that milestone by 2030. The World Bank’s own 2018 Poverty and Prosperity report offers a stark warning: “To reach our goal of bringing extreme poverty below 3 percent by 2030, the world’s poorest countries must grow at a rate that far surpasses their historical experience.”2 Another report projects that climate change and forced displacement will cause another 100 mil- lion people to fall into extreme poverty by 2030.3 Even if 4 percent of the world’s population remains below the threshold in 2030, this will be an estimated 340 million people, more than the current population of the United States— hardly a footnote or a rounding error.4 This is unacceptable from a moral, rights- based standpoint. It is also an inefficient use of global human potential, creating less opportunity and progress for us all. Breaking the poverty trap so that hundreds of millions can become productive economic citizens is both an ethical impera- tive and sound economic policy. This chapter seeks to advance an understanding of the microeconomic and psychological reality of what it means to be ultra- poor, while pointing to an emerging set of scalable, science- based solutions that can break the trap. “The poor” are not a homogenous group, and even the term “extreme poor” is often used to lump together people facing very different circumstances. Using the grad- uation approach pioneered by BRAC as one example, this chapter will highlight ways to tackle ultra- poverty through the emerging “science of hope,” which posits that when coupled with skills and material support, an injection of well- founded hope and optimism into the lives of the ultra- poor can break the poverty trap. A growing body of evidence suggests that programs activating people’s sense of self- worth lead to improvements in employment, earnings, mental health, polit- ical awareness, and women’s influence in the household. There is also growing evidence to suggest that when it comes to ultra- poverty, purely economic boosts, including relatively quick fixes such as unconditional cash transfers or universal basic income, can fail to break the trap, while more holistic changes make the crucial difference. 1. Lowrey (2013). 2. World Bank (2018). 3. Hallegatte and others (2016). 4. Also concerning is that the majority of progress against extreme poverty in recent decades came from East Asia and the Pacific region, with much of it tied to China’s rise. This will not neces- sarily carry over into other regions. In sub-Saharan Africa, absolute numbers of the extreme poor are actually growing, from 278 million in 1990 to 413 million in 2015. See World Bank, 2018, “Poverty and Shared Prosperity 2018—Piecing Together the Poverty Puzzle.” Kharas-McArthur-Ohno_Leave No One Behind_i-xii_1-340.indd 42 9/6/19 1:57 PM Breaking Out of the Poverty Trap 43 What Is Ultra- Poverty? Ultra- poverty is hard to define. The commonly accepted extreme poverty income threshold is currently $1.90 per day, and the ultra- poor tend to live on less than that. At levels that low, income- and consumption- based definitions stop being meaningful. Those who work closely with the ultra- poor observe that their suf- fering has a distinctive character, even compared to people just slightly better off. We define ultra- poverty as a sub- segment of extreme poverty characterized by material destitution and psychological despair so severe that mainstream devel- opment assistance and market- led solutions make no dent in it. It is among the clearest examples of a poverty trap: a self- reinforcing state of physical, material, and psychological deprivation seemingly immune to most interventions designed to boost people’s income and well- being. A useful lens through which to view ultra- poverty is economist Amartya Sen’s definition of poverty as a “deprivation of basic capabilities,” including the free- doms and choices that most of us take for granted, specifically “the substantive freedoms [a person] enjoys to lead the kind of life he or she has reason to value. In this perspective, poverty must be seen as the deprivation of basic capabilities rather than merely as lowness of incomes, which is the standard criterion of iden- tification of poverty.”5 Based on qualitative reports from development workers and researchers, a functional understanding of what ultra- poverty looks like has emerged, and it tracks closely with Sen’s definition.6 Far beyond simply having low incomes, the ultra- poor are bereft of any semblance of those substantive freedoms. Figures vary as to how many people fall into this category, as the data is spotty and the definition remains loose, but the number likely remains in the hundreds of millions. According to a 2007 report from International Food Policy Research Institute based on 2004 data, about 162 million people lived in ultra- poverty, which was defined at the time as living on less than 50 cents a day, in 1993 purchasing power parity (PPP) dollars, with an additional 323 million living in “medial poverty,” defined as living on between 50 and 75 cents a day.7 Accord- ing to a more recent estimate from 2017, 736 million people live in extreme poverty— that is, below $1.90 per day in 2011 PPP terms— and of these, more than half, or around 394 million people, are living in ultra- poverty.8 5. Sen (1999). 6. See “Impact Pathways: Stories from People Behind the Numbers,” from Akhter U. Ahmed and others, “The Impact of Asset Transfer on Livelihoods of the Ultra Poor in Bangladesh,” Research Monograph Series No. 39, BRAC Research and Evaluation Division, April 2009, (http:// ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/125248/filename/125249.pdf) 7. Ahmed and others (2007). 8. Reed and others (2017). Kharas-McArthur-Ohno_Leave No One Behind_i-xii_1-340.indd 43 9/6/19 1:57 PM 44 Lindsay Coates and Scott MacMillan All poverty arises from a complex set of interrelated causes, often tied to fail- ures in politics and governance along with systematic marginalization of minori- ties, migrants, and— almost universally across cultures— women. For those at the very bottom, addressing the problem requires highly adapted approaches that account for the unique characteristics of ultra- poverty in each region or even community. The indicators of ultra- poverty are multi- modal: the Global State of Ultra- Poverty, which numbered the population of global ultra- poor at 394 million, defines ultra- poverty using the Multidimensional Poverty Index, a measure that uses methods developed by Sabina Alkire and James Foster of the Oxford Poverty and Human Development Initiative.9 The method assesses pov- erty across multiple indicators, including education, electricity, sanitation, and access to drinking water.10 It is challenging to promote common approaches to such complex, multifac- eted problems, each with their own set of contextual realities. Worse yet, access to existing support programs— whether provided by government or civil soci- ety— is spotty across regions, which is again tied to discrimination as well as political and social marginalization. In some places, promoting access to a local government vaccination program might help solve a critical health need; in other places, such a program might not even exist for anyone. Despite the uneven progress and complexity of the diagnosis in any given con- text, interest in addressing ultra- poverty— and the capacity to do so— is growing among governments and global development institutions. The Partnership for Economic Inclusion (PEI), which is housed at the World Bank and advocates for accelerated innovation and scaling of the graduation approach,11 gives a snapshot of progress in its 2018 State of the Sector report.12 Governments from thirty- four countries are now engaged in graduation (sometimes also referred to as “produc- tive inclusion”), double the number from 2016, reaching an estimated 14 million people.
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